Verizon, AT&T, Altria Among Top CDS-Adjusted Dividend Stocks

By Michael Aneiro

Citi equity strategists are out with their latest CDS-adjusted dividend stock screen, which hunts for stocks of companies with high dividend yields that are also on top-tier financial footing as judged by the market for credit-default swaps.

Citi filters for global stocks with a market cap greater than $10 billion, a dividend yield 1.5% higher than median-yielding stocks and CDS under 100 basis points (the lower the CDS, the lower the perceived credit risk). Citi’s resulting list consists of 41 companies with a 4.8% average yield, and Citi forecasts these dividends to grow by 7% in 2012 and 5% in 2013. The constituents have an average five-year CDS of 70 bps, equivalent to the sovereign CDS of Germany, indicating a similar perceived likelihood of default over the next half-decade.

Sector-wise, the list skews toward an overweight in Europe and defensive stocks and an underweight in financials. largely due to their high perceived CDS risk. Here are the nine U.S.-based companies on Citi’s list:

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.